Senate panel gets closer to passing bill targeting Yelp 'gag clauses'

The Senate Commerce Committee is inching closer to passing legislation to limit gag clauses that can discourage customers from posting negative online reviews on sites such as Yelp, Angie's List and TripAdvisor.

The Consumer Review Freedom Act is slated for a markup in the next couple weeks, but it will receive a few tweaks before the committee vote.

The legislation would bar companies from burying clauses in their terms of service agreements that discourage customers from posting negative online reviews by threatening fines or legal action.

The legislation is backed by major tech trade groups and the online review industry, including Yelp, Angie's List, and TripAdvisor. TripAdvisor, which testified Wednesday, said it already flags businesses that use the gag clauses when they are reported by the public.

Much of the information about gag clauses is anecdotal at this point. There are no good numbers on what kind of companies employ them most or the frequency they are being used.

Some in the medical and healthcare industry had been encouraged to adopt the clauses in the past but have since moved away from them. And according to witnesses, law offices, doctor's offices, accountants and other small businesses such as bed and breakfasts may also have an incentive to include the clauses in their contracts.

Schatz, one of the bill's cosponsors, noted that "[legislators] are operating at the beginning of this problem." But he said it is necessary for Congress to step in because "it seems to me there is not" a private sector solution.

The Senate bill would give authority to states and the Federal Trade Commission to enforce the law. If the legislation starts moving, it will eventually have to be resolved with the House version, which gives that enforcement authority to the Justice Department.

More immediately, the committee plans to scrap one portion of the bill that deals with how state attorneys general can hire outside lawyers and expert witness services when pursuing a case.

The current bill contains a section that bars states from entering "into a contingency fee agreement for legal or expert witness services." Those contingency fee agreements allow a client to acquire legal service without upfront payment. The lawyers' payment is usually based on a percentage of the winnings, but only if the court battle is successful.